Federal Finance Minister Jim Flaherty has announced changes to Old Age Security, or OAS, in the Canada budget 2012. (CP/Alamy)

Finance Minister Jim Flaherty delivered a budget today that cut less than the government warned, but didn't spare Old Age Security from planned changes while also taking on civil service and MP pensions.

The budget cuts $5.2 billion in spending over the next three years, at the low end of the $4 to $8 billion range Flaherty had prepared Canadians for.

Among the departments hardest hit by the cuts are the Department of Finance, the Privy Council Office - the civil servants who provide administrative support to the Prime Minister’s Office – as well as Transport Canada and the Treasury Board. National Defence lost the most money overall, with cuts hitting $1.1 billion by 2014-15.

GALLERY: FEDERAL BUDGET HIGHLIGHTS

Flaherty said the budget was created for the long-term and it offers few of the targeted tax credits his government usually includes.

Changes to the age of eligibility for OAS will start in April 2023, rising gradually to age 67 from 65 by Feb. 1, 2029, affecting those born after April 1, 1958.

Those who choose to work longer will be able to defer their OAS for up to five years, giving them a higher pension later. And the government will start enrolling seniors automatically for OAS and GIS, rather than making them apply, a move the NDP suggested earlier this month.

There were also targeted moves to appease taxpayers, such as increasing the amount people can spend cross-border shopping before paying duties, which will bring the limits into line with those of the U.S. Under the measure, Canadian travellers will be able to bring back $200 in goods after 24 hours abroad and $800 after 48 or more hours outside the country as of June 1, 2012. The current limits are $50 after a day, $200 after two days, up to $700 for a week.

And Canadians will lose the iconic but costly penny, as the Mint stops production before next fall. It can still be used, but no more will be introduced into circulation.

Some other measures in the budget:

The governor general will start paying income taxes, but the salary will be increased to cover the difference.

Canadians will be allowed to take more temporary work before the government claws back Employment Insurance payments.

Ottawa will align its income assistance program with the provinces for on-reserve First Nations workers and encourage job training.

People who applied to come to Canada under the Foreign Skilled Worker program will get refunds for their $400 application fee.

New categories will be added to a list of recognized foreign qualification jobs, including licensed practical nurses, doctors and teachers.

Elections Canada funding will be cut by $7.5 million a year, starting in 2012-13.

Foreign aid and international development assistance across several departments and agencies is being cut by $377 million by 2014-15, with the Canadian International Development Agency to bear the brunt of the cuts at $319.2 million.
The Canadian Coast Guard will get $5.2 billion over 11 years.

The CBC also got hit, with its base funding cut 10 per cent over three years, meaning a reduction of $115 million by 2014-15. But an annual $60 million programming top-up has been folded into the base funding to which the 10 per cent cut applies.

The government answered a long-time demand of the Assembly of First Nations, though not with as much money as the organization had asked for, by pledging $275 million for on-reserve schools. The AFN had wanted $500 million to bring the schools up to par with those in the rest of Canada. The government aims to bring in a First Nations Education Act for Sept. 2014 to improve on-reserve elementary and secondary schools and increase First Nations graduation rates, the budget says. The Conservatives are also fulfilling a promise to streamline the approvals process for major resource projects such as mining and piplelines, going to a "one project, one review" policy, within 24 months. This change will affect projects retroactively — meaning projects currently under review could be expedited.

Innovation and research and development is a key theme in the budget, with the adoption of many of the recommendations made by business leader Tom Jenkins in a report he made last fall. The National Research Council will be refocused on business-driven applied research, applications for innovation funding will be streamlined and based on labour costs, not capital costs, and money will be shifted from tax credits to grants and to venture capital that will encourage early-stage investments.

Job cuts centred on Ottawa

Many of the cuts will hit the bureaucracy in the capital, not the front-line services most taxpayers deal with. 19,200, or 4.8 per cent, of federal jobs, including those eliminated through attrition, and mostly from Ottawa and Gatineau, Que., the national capital region. That’s less than half the growth in the public service since 2006 when the Conservatives were elected.

The government will adjust public service pensions so employees and the government each contribute 50 per cent. Starting in 2013, new hires will be eligible for retirement at age 65, rather than 60.

MPs and senators will also start paying more for their pensions, moving gradually starting Jan. 1, 2013, to a 50-50 split.

Other changes, such as extending the amount of time they have to serve in Parliament before qualifying for a pension, will come after the next election. Right now, MPs and senators can collect a pension after spending six years in Parliament.

The budget also promises other cuts:

The Public Appointments Commission Secretariat will be eliminated.

Benefits will be reduced and postings extended for public servants working abroad.

Some official residences abroad will be sold and staffing downsized.

National Round Table on the Environment and the Economy will be eliminated.

The Katimavik youth volunteer program will be wrapped up.

Advanced Leadership Program at the Canada School of Public Service will be eliminated.

Assisted Human Reproduction Canada, an agency that the provinces successfully curtailed, will be wound up by March 13, 2013.